REG - Rio Tinto - Conditions on Simandou investment now satisfied

Rio TintoAnnouncement

16/07/2024 07:00

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RNS Number : 4949W  Rio Tinto PLC  16 July 2024

 

Notice to
ASX/LSE

 

Conditions on Simandou investment now satisfied

16 July 2024

 

 

All conditions have now been satisfied for Rio Tinto's investment to develop
the Simandou high-grade iron ore deposit in Guinea, including the completion
of necessary Guinean and Chinese regulatory approvals. The transaction is
expected to complete during the week of 15 July 2024.

 

Along with the recent approval by the Board of Simfer 1  (#_ftn1) , this
allows Simfer to invest in and fund its share of co-developed rail and port
infrastructure being progressed in partnership with Winning Consortium
Simandou 2  (#_ftn2)  (WCS), Baowu and the Republic of Guinea.

 

More than 600 kilometres of new multi-use trans-Guinean railway together with
port facilities will allow the export of up to 120 million tonnes per year of
mined iron ore by Simfer and WCS from their respective Simandou mining
concessions in the southeast of the country 3  (#_ftn3) .  Together, this
will be the largest greenfield integrated mine and infrastructure investment
in Africa.

 

Rio Tinto Executive Committee lead for Guinea and Copper Chief Executive Bold
Baatar said: "We thank the Government of Guinea, Chinalco, Baowu and WCS for
their partnership in reaching this milestone towards developing the world
class Simandou project.

 

"Simandou will deliver a significant new source of high-grade iron ore that
will strengthen Rio Tinto's portfolio for the decarbonisation of the steel
industry, along with trans-Guinean rail and port infrastructure that can make
a significant contribution to the country's economic development."

 

Under the terms of the transaction, Simfer will acquire a participation in the
WCS project companies constructing rail and port infrastructure, commit to
perform a portion of the construction works itself and commit to funding its
share of the overall co-developed infrastructure cost, in an aggregate amount
of approximately $6.5 billion (Rio Tinto share approximately $3.5 billion) 4 
(#_ftn4) .

 

Chalco Iron Ore Holdings Ltd (CIOH) has now paid its share of capital
expenditures incurred or required by Simfer to progress critical works up to
completion. A first payment of approximately $410 million, for expenditures
until the end of 2023, was made on 28 June 2024, and a second payment of
approximately $575 million, for 2024 expenditures, was made on 11 July 2024.
These amounts settle all expenditures incurred to date.

 

The co-developed infrastructure capacity and associated cost will be shared
equally between Simfer, which will develop, own and operate a 60 million tonne
per year 5  (#_ftn5) mine in blocks 3 and 4 of the Simandou Project, and WCS,
which is developing blocks 1 and 2.

 Under the co-development arrangement, Simfer and WCS will deliver separate
infrastructure scopes to leverage expertise. Simfer will construct the
approximately 70 kilometre Simfer spur rail line and a 60 million tonne per
year transhipment vessel (TSV) port, while WCS will construct the dual track
approximately 536 kilometre main rail line, the approximately 16 kilometre WCS
spur rail line and a 60 million tonne per year barge port.

 Once complete, all co-developed infrastructure and rolling stock will be
transferred to and operated by the Compagnie du Transguinéen (CTG) joint
venture, in which Simfer and WCS each hold a 42.5% equity stake and the
Guinean State a 15% equity stake 6  (#_ftn6) .

 

First production from the Simfer mine is expected in 2025, ramping up over 30
months to an annualised capacity of 60 million tonnes per year(5) (27 million
tonnes Rio Tinto share). The mine will initially deliver a single fines
product before transitioning to a dual fines product of blast furnace and
direct reduction ready ore.

 

Simfer's capital funding requirement for the Simandou project as a whole is
estimated to be approximately $11.6 billion, of which Rio Tinto's share is
approximately $6.2 billion, broken down as follows.

 

 US dollars in billions (nominal terms)                                          Simfer capex  Rio Tinto share
 Mine and TSVs, owned and operated by Simfer
 Development of an initial 60Mt/a mine at Simandou South (blocks 3 & 4), to      $5.1          $2.7
 be constructed by Simfer
 Co-developed infrastructure, owned and operated by CTG once complete
 Simfer scope (funded 100% by Simfer during construction)                        $3.5          $1.9

 Rail: a 70 km rail-spur from Simfer mine to the mainline, including rolling
 stock
 Port: construction of a 60Mt/a TSV port
 WCS scope (funded 34% by Simfer during construction)                            $3.0          $1.6

 Port and rail infrastructure including an approximately 552 km trans-Guinean
 heavy haul rail system, comprised of a 536 km mainline and a 16 km WCS rail
 spur

 Total capital expenditure (nominal terms)                                       $11.6         $6.2 7  (#_ftn7)

 

Rio Tinto's share of expected capital investment remaining to be spent from 1
January 2024 is to be $5.7 billion. Rio Tinto's expected funding requirements
for 2024 and 2025 are included in its share of capital investment guidance for
this period, with project funding expected to extend beyond this timeframe.

Further details on the Simandou project can be found in the 2023 Investor
Seminar presentation at https://www.riotinto.com/en/invest/investor-seminars
(https://www.riotinto.com/en/invest/investor-seminars) .

 

As Chinalco, Baowu, China Rail Construction Corporation and China Harbour
Engineering Company are Chinese state-owned entities, and given Chinalco
indirectly holds 11.2% of shares in the Rio Tinto Group, they, and WCS, may be
considered to be associates of a related party of Rio Tinto for the purpose of
the UK Listing Rules. Rio Tinto's funding commitment pursuant to the
infrastructure co-development arrangement (Rio Tinto share $3.5bn) is a
smaller related party transaction for the purposes of Listing Rule 11.1.10R
and this announcement is, therefore, made in accordance with Listing Rule
11.1.10R(2)(c).

 

Contacts

Please direct all enquiries to media.enquiries@riotinto.com

 

 

 

 Media Relations,        Media Relations,               Media Relations,
 United Kingdom          Australia                      Americas

 
 
 

 Matthew Klar            Matt Chambers                  Simon Letendre

 M +44 7796 630 637      M +61 433 525 739              M +1 514 796 4973

 David Outhwaite         Jesse Riseborough              Malika Cherry

 M +44 7787 597 493      M +61 436 653 412              M +1 418 592 7293

                         Alyesha Anderson               Vanessa Damha

                         M +61 434 868 118              M +1 514 715 2152

                         Michelle Lee

                         M +61 458 609 322

 Investor Relations,     Investor Relations,
 United Kingdom          Australia

 
 

 David Ovington          Tom Gallop

 M +44 7920 010 978      M +61 439 353 948

 Laura Brooks            Amar Jambaa

 M +44 7826 942 797      M +61 472 865 948

 Rio Tinto plc           Rio Tinto Limited

 
 

 6 St James's Square     Level 43, 120 Collins Street

 London SW1Y 4AD         Melbourne 3000

 United Kingdom          Australia

 T +44 20 7781 2000      T +61 3 9283 3333

 Registered in England   Registered in Australia

 No. 719885              ABN 96 004 458 404

This announcement is authorised for release to the market by Andy Hodges, Rio
Tinto's Group Company Secretary.

 

 

 

 

 

 

riotinto.com

(( 1  (#_ftnref1) )) Approval has been granted by the Board of Simfer Jersey
Limited, a joint venture between the Rio Tinto Group (53%) and Chalco Iron Ore
Holdings Ltd (CIOH) (47%), a Chinalco-led joint venture of leading Chinese
SOEs (Chinalco (75%), Baowu (20%), China Rail Construction Corporation (2.5%)
and China Harbour Engineering Company (2.5%)). Simfer Infraco Guinée S.A.U.
will deliver Simfer Jersey's scope of the co-developed rail and port
infrastructure, and is, on the date of this notice, a wholly-owned indirect
subsidiary of Simfer Jersey Limited, but will be co-owned by the Guinean State
(15%) after closing of the co-development arrangements. Simfer S.A. is the
holder of the mining concession covering Simandou Blocks 3 & 4, and is
owned by the Guinean State (15%) and Simfer Jersey Limited (85%).

 2  (#_ftnref2) WCS is the holder of Simandou North Blocks 1 & 2 (with the
Government of Guinea holding a 15% interest in the mining vehicle and WCS
holding 85%) and associated infrastructure. WCS was originally held by WCS
Holdings, a consortium of Singaporean company, Winning International Group
(50%) and Weiqiao Aluminium (part of the China Hongqiao Group) (50%). On 19
June 2024, Baowu Resources completed the acquisition of a 49% share of WCS
mine and infrastructure projects with WCS Holdings holding the remaining 51%.
. In the case of the mine, Baowu also has an option to increase to 51% during
operations. After Closing, Simfer will hold 34% of the shares in the WCS
infrastructure entities during construction with WCS holding the remaining
66%.

 3  (#_ftnref3) WCS holds the mining concession for Blocks 1 and 2, while
Simfer S.A. holds the mining concession for blocks 3 and 4. Simfer and WCS
will independently develop their mines.

 4  (#_ftnref4) A true-up mechanism will apply between Simfer and WCS to
equalise most of their costs of constructing the co-developed rail and port
infrastructure. The figures shown here are pre-equalisation.

 5  (#_ftnref5) The estimated annualised capacity of approximately 60 million
dry tonnes per annum iron ore for the Simandou life of mine schedule was
previously reported in a release to the Australian Securities Exchange dated 6
December 2023 titled "Simandou iron ore project update
(https://www.riotinto.com/en/news/releases/2023/simandou-iron-ore-project-update)
". Rio Tinto confirms that all material assumptions underpinning that
production target continue to apply and have not materially changed.

 6  (#_ftnref6) Ownership of the rail and port infrastructure will transfer
from CTG to the Guinean State after a 35 year Operations Period, with Simfer
retaining access rights on a non-discriminatory basis and at least equivalent
to all Third Party Users.

 7  (#_ftnref7) By the end of 2023, Rio Tinto spent $0.5 billion (Rio Tinto
share) to progress critical path works. Rio Tinto's share of expected capital
investment remaining to be spent from 1 January 2024 was $5.7 billion.

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